Factorial CGE-Based Analysis for the Indirect Benefits of the Three Gorges Project

Abstract

Large-scale hydraulic projects (LHPs) have become increasingly significant in river basin flood-risk management. Although LHPs’ direct flood-retention benefits have been clearly shown, there has been a dearth of a comprehensive examination of their indirect implications, which can be more long-lasting and substantial in both environmental and economic terms. Thus, this study develops a factorial computable general equilibrium (CGE)-based LHP-effect analysis approach (FLEA) to quantify the indirect impacts of LHPs and simulate postflood recovery strategies under diverse scenarios. The FLEA integrates a factorial analysis with a dynamic CGE framework, including a flood module that connects hydraulic initiatives to the economy during floods. The FLEA is applied to the Three Gorges Project (TGP). The results demonstrate that ∼$57 billion in Gross Domestic Product (GDP) and ∼12.9 Mt CO2eq reduction would be created annually through supply chains by the TGP. When floods strike, the TGP has the potential to save ∼$21 billion in GDP directly and reduce long-term GDP losses by ∼50% throughout the reconstruction period. The TGP can have a considerable indirect impact on manufacturing. Furthermore, improved regulations and maintenance for the TGP may be desired for mitigating long-term flood-related losses, which is more crucial than aggressive postflood fiscal stimuli.